Two Walgreen Co. executives have stepped down in the wake of an abrupt $1.1 billion cut in the company's pharmacy-unit earnings forecast for fiscal year 2016, according to a report from The Wall Street Journal.
In April, then-CFO Wade Miquelon projected $8.5 billion in pharmacy earnings before interest and taxes, partly from contracts the company has entered into to dispense medications under the Medicare Part D prescription drug benefit, according to the report. Pharmacy chains like Walgreen enter into long-term agreements with insurance companies and others that operate Part D plans to dispense various medications for set charges.
However, last month, Mr. Miquelon decreased his forecast by $1.1 billion. He then stepped down earlier this month and has been replaced by Timothy McLevish, a former Kraft executive, according to the report. The company has also announced President of Pharmacy, Health and Wellness Kermit Crawford will retire at the end of the year. Although Mr. Miquelon and Mr. Crawford have said they weren't forced out, sources "familiar with the decision" told the Journal the two executives were pushed to step down.
As for what caused the forecasting error, the Walgreen finance unit failed to factor an increase in drug manufacturers' prices for generic medications into April's projections, according to the report. Walgreen President and CEO Gregory Wasson said in a call with investors earlier this month that the company didn't "fully anticipate" the rise in generic drug prices. Investors have said company directors told them the finance and pharmacy units didn't communicate adequately, according to the report.
Walgreen rival CVS Caremark Corp. has said the generic drug price increases weren't a surprise and haven't affected its forecasts, according to the report.